Profits sink at Robert Walters

Robert Walters’ (RWA) operating profit plunged by 60 per cent to £11.2mn in the first half of 2023, following a major decline in consultant productivity. While gross profit – referred to by recruiters as net fee income – dipped by just 4 per cent year on year, administrative costs weighed heavily on the bottom line. 

The company’s exposure to Asia and the UK was a big problem in the period. Net fee income shrank in both regions, while operating profits tumbled by 47 per cent and 97 per cent, respectively. Europe also saw a profit fall, but managed to grow net fee income by 9 per cent. 

Robert Walters’ focus on permanent positions – as opposed to temporary contracts – also weighed on growth.

It’s unclear when the situation will improve. Chief executive Toby Fowlston, who took the reins in April, said the “reduced client and candidate confidence levels that the group first signalled during the second half of last year have yet to show sustained signs of improvement across many of the group's markets and specialist disciplines”.

Meanwhile, following a post-pandemic hiring spree, Robert Walters is still grappling with an excess of consultants. Headcount is up 6 per cent year on year at 4,280, but fell 3 per cent quarter on quarter due to “natural attrition”.

The group has maintained its half-year dividend, and analysts at Investec said its shares are 10 per cent cheaper than the sector average, which could be an “attractive entry point for those willing to be patient”.  We remain very wary of the state of the job market, however, and the painful effects of Robert Walters’ operational gearing. Hold.

Last IC View: Hold, 510p, 10 Mar 2023